What is a skills taxonomy and how do you create one?

Streamline skills management, identify skill gaps, and drive strategic workforce planning with our step-by-step skills taxonomy playbook.

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What is a skills taxonomy?

A skills taxonomy refers to a structured framework or classification system that categorises and organises the various skills and competencies within a specific industry, organisation, or field of expertise. It provides a standardised and consistent way of identifying, describing, and grouping skills based on their characteristics, levels of proficiency, and relationships to other skills.

Here are some definitions of a skills taxonomy in the context of business:

“A skills taxonomy is a structured list of skills defined at the organisation level that identifies the capabilities of a business in a quantifiable way.”

Source: AIHR

“Skills taxonomies offer a way to manage and identify the skills that make your business and your employees successful.”

Source: Linkedin Learning

Several country/region/industry skills taxonomies exist. They include:

What is a team?

Importance of creating a skills taxonomy

Developing a skills taxonomy is regarded as the cornerstone of a skills-based approach. By establishing a common language and framework for skills, a skills taxonomy helps organisations better understand their employees' skill sets, identify skill gaps, match talent to specific roles or projects, and make informed decisions related to recruitment, training, and career development. All this facilitates effective skills management, talent development, workforce planning, and other HR processes.

The utilisation of a skills taxonomy to drive skills management and strategic workforce planning is not a new trend. Multinational companies have deployed them in the past to optimise workforce utilisation. However, today, the introduction of technology, including AI, has revolutionised the way organisations manage skills by enabling more efficient identification, visualisation, and utilisation of employee skills, facilitating targeted training and development programs, and supporting data-driven decision-making in talent management.

By using smart skills management software, companies can now seamlessly and efficiently ensure that the right skills are matched with the right opportunities, enabling agile responses to changing business needs, and ultimately driving organisational success.

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How to create a skills taxonomy

Before we go on to outline the five steps to creating a skills taxonomy, it is important to remember that the process is not a one-time exercise but an ongoing process that requires a systematic approach because it has an impact on various aspects of an organization, including recruitment, internal mobility, growth and development, diversity, and pay.

Step 1: Establish a skills taxonomy project team

Form a project team comprising representatives from various departments within your organisation. It should include key stakeholders who will benefit from the skills taxonomy. By involving representatives from different sections, you ensure alignment and a shared understanding of the taxonomy’s objectives and implementation across all departments.

Step 2: Identify key challenges addressed by a skills taxonomy

With the project team in place, convene a meeting to discuss the following question: “What are the critical issues that a skills taxonomy will help resolve?” This will help you compile a comprehensive list of benefits that your organisation stands to gain through the implementation of a skills taxonomy. These advantages may range from identifying employees who need training or upskilling to take on additional responsibilities or fill vacant positions, to optimising internal talent allocation to reduce the need for external hiring.

Below is a list of the various benefits of creating a skills taxonomy, presented in no order of importance:

  • Increasing productivity for key roles:
    By identifying skill gaps in employees holding key roles, organisations can provide targeted training to enhance their knowledge and skills, leading to increased productivity and well-being.
  • Designing learning and development programs more efficiently:
    Understanding the skill gaps within the organisation enables the creation of learning paths or journeys that guide employees to upskill or develop their areas of interest further.
  • Clarifying skills required for each role:
    Defining the specific skills needed for each role helps employees explore and understand which roles align with their abilities and aspirations, enabling them to grow within the organisation.
  • Internal recruitment:
    With a clear understanding of required skills and a comprehensive skills inventory of all employees, skill mapping can swiftly identify suitable internal candidates for vacant roles, saving time and resources typically spent on external recruitment.
  • Identifying software adoption issues:
    Skill mapping allows organisations to assess employees’ proficiency and usage of software. Any skill gaps identified can be addressed through education programs aimed at optimising software usage.
  • Identifying digitalisation opportunities:
    Mapping employees’ software usage and core tasks helps identify if outdated solutions are being utilised. This enables organisations to initiate digitalisation projects that introduce updated and efficient work processes and tools.
  • Identifying upskilling opportunities for functional skills:
    By mapping required functional skills and skill levels, organisations can identify areas where additional education and training is needed.
  • Team/department skill distribution mapping:
    Reviewing skill distribution and levels within a department or team helps assess whether additional hiring or upskilling of existing employees is necessary. It also helps identify skill gaps and areas that may require improvement for enhanced efficiency.
  • Assessing knowledge level of products/services:
    Evaluating employees’ understanding of the organisation’s products or services helps identify opportunities for training and development. For example, ensuring that customer support team members are proficient in the software they support.
  • Competency mapping:
    For instance, leadership competencies. Providing explicit guidance on the specific skills leaders within the organisation should prioritise enables leaders to identify any gaps in their skill set and helps the organisation provide access to relevant learning opportunities.
  • Getting future ready:
    Mapping skills using a skills taxonomy helps organisations understand if they have the skills required for the future of their industry or field of expertise.

By leveraging a skills taxonomy, organisations can unlock all these benefits to optimise their workforce, drive growth, and foster a culture of continuous learning and improvement.

Step 3: Determine the initial skills to include in the taxonomy

Let’s be realistic here. Building a skills taxonomy for the entire organisation from scratch is quite a big ask. Instead, focus on two to three areas and once those are established and the project team and stakeholders understand the concept better, you can expand it into the rest of the organisation. 

HR expert and thought leader Josh Bersin suggests that organisations working on skills taxonomy projects start with a strategic business need and expand from there. He suggests to initially focus on the following three specific functional domains and involve subject matter experts in the exercise:

  1. Underperforming operations such as in sales, customer service or HR.
  2. A current or future talent gap
  3. Long term transformation

Bersin also cautions organisations that while they are focusing on internal skills for the taxonomy, they shouldn’t neglect monitoring external skills such as emerging skills and competencies that may be vital to acquire soon if the organisation is to stay competitive. 

The MuchSkills way

At MuchSkills, we suggest that our clients consider two primary aspects while deciding what skills to include in the skills taxonomy. The skills identified should:

  • Align with the organisation’s task planning and workforce development:
    They should enable the organisation to effectively plan tasks and strategically develop its workforce. Mapping these specific skills provides valuable insights into the specific competencies required for different roles, aligning the workforce with organisational goals and its future needs.
  • Enhance employee mentoring and coaching:
    The selected skills for the taxonomy should enhance the organisation’s employee mentoring and coaching practices. Listing these skills allows for the identification of skill gaps, targeted mentorship opportunities, and the development of coaching programs that foster professional growth among employees. This creates a supportive environment for continuous learning, improved performance, and maximised workforce potential.

Step 4: Assess and validate skills

When it comes to assessing and validating skills, organisations can explore various methods to ensure accuracy and reliability. These include self-assessment, manager assessment and external certifications.

By leveraging a combination of self-assessment, manager assessment, and external certifications, organisations can gain a comprehensive and well-rounded understanding of their employees’ skills and ensure a robust validation process. Whatever method chosen, the quality of your data will depend on the design of the framework in place to capture this assessment.

Having said that, when it comes to assessing skills within the organisation, it is important to remember that a one-size-fits-all approach may not be necessary. Clients often express concerns about the accuracy of skill mapping, especially when self-assessment is involved. However, taking a broader perspective can help address these concerns and foster a more open environment for employees to share their skills. Here's a guide to help you optimise skills validation for effective workforce planning:

  • Embrace a broader perspective: Instead of aiming for a perfect skill mapping, focus on gathering a comprehensive view of your employees' skills. With our methodology and approach, employees feel encouraged to share a wide range of skills. MuchSkills typically collects 50-200 skills per employee, which means that if a manager oversees 10 employees, you will have 500-2000 skills to validate.
  • Prioritise essential skills: Given the volume of data involved, it's neither necessary nor feasible to validate every single skill. Instead, prioritise validating the skills that are crucial for planning essential work. These are the skills that directly impact the success of projects and tasks. For instance, you can use third-party or internal validators to conduct competency tests for these essential skills.
  • Understand the purpose of skill mapping: It's important to recognise that the primary goal of skill mapping is to gain a deeper understanding of your workforce. The mapped skills are used to develop upskilling and growth strategies, as well as inform learning and development initiatives and hiring strategies. Therefore, the focus should be on creating a moment of self-reflection for employees and fostering discussions between employees and managers.
  • Less stringent validation for coaching and growth: While validating essential skills is crucial, skills related to coaching and employee growth don't require the same level of validation. These skills contribute to personal development and may not directly impact immediate work outcomes. Consequently, they can be mapped without the need for perfect validation.
  • Optimise efficiency with a skills validation model: By adopting a broader perspective and understanding the purpose of skill mapping, you can create a more efficient skills validation model that focuses on what truly matters. This ensures that resources are allocated effectively, and validation efforts are directed towards essential skills.

By following these guidelines, you can optimise the skills validation process for effective workforce planning. Remember, the key is to strike a balance between validating essential skills and fostering a culture of self-reflection and open discussion between employees and managers.

With MuchSkills, organisations can seamlessly integrate all three assessment methods, enabling organisations to leverage self-assessment, manager assessment, and external certifications in a single platform for a streamlined and holistic approach to skills assessment and validation.

Step 5: Create a skills inventory (if not already in place)

A skills inventory entails creating a comprehensive and detailed list of all the skills and educational qualifications present within the organisation. Combining a skills taxonomy (representing the skills required for organisational success) with a skills inventory (reflecting the existing skills within the organisation at a given time) allows for conducting a thorough skills gap analysis. This analysis sheds light on any crucial skills that may be lacking, enabling you to chart an informed path forward, whether it involves training, learning and development initiatives, or strategic hiring decisions.

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How to use your skills taxonomy in MuchSkills to spot skill gaps

For this section, we assume you are already a MuchSkills user. If you aren’t, here are a few tutorials you might want to read first:


Once you are up to speed about how to use MuchSkills (and if you are already using MuchSkills) you can use ‘Custom Skills’ to list your skills taxonomy.

Using your skills taxonomy in MuchSkills to conduct a skills gap analysis

Step 1: Create custom skills where you input the two-three important skill areas you have determined must be included in the taxonomy

In MuchSkills, click on ‘TEAM/ORG’ in the top menu and then click on the ‘Settings’ tab on the right. Click on ‘Manage Skills’ and then ‘+ Skill Category’. Add a name for your skill set – let’s call it ‘Essential Skills'– and choose the sector chart. If you are not so keen on measuring skill levels but would like to collect interest-based or experience-based data instead, then use the bubble chart visualisation where users can quickly list and rank their experience/interest in a domain or subject. 

Note: You can make custom skill categories for several critical skill categories but it’s best not to add too many because that can be overwhelming for your employees. Below are some suggestions for custom skill categories along with examples of those skills: 
  • Essential Skills – Conflict handling, empathy, interpersonal skills, delegation skills
  • Methodologies – PRINCE2,  Agile methodology, PMBOK, Scrum Master
  • Functional Skills – Documentation and writing skills, unit testing, acceptance testing, giving training/demos on product

Step 2: Add the identified skills along with descriptions

One by one, add the skills you have ascertained must be present in your skills taxonomy, a description of each of those skills, which department’s members should select the listed skills, and whether the skill is mandatory.

Important: Do remember that skill descriptions are an important part of a skill taxonomy. The more specific you are here, the less the chances of individuals interpreting it differently. Specific skill descriptions in your taxonomy will help you get a more accurate picture of skills growth or gaps if any. 

For more details on how to use the ‘Custom Skills’ function, go to this guide: How to set up custom/company specific skills for your organisation

Step 3: Ensure your skills inventory on MuchSkills is updated

Once you have populated your custom skills, you have a baseline in terms of the skills your organisation must have to be successful. You can now compare the skills available in your organisation (your skills inventory) against this baseline to identify any skill gaps and take remedial action. So, do get your employees to map their skills on MuchSkills if they haven’t already because that will be your skills inventory.

Step 4: Conduct a skills gap analysis

Finally, conduct a skills gap analysis. Here are two resources you can use to help you:

Playbook: Skills Gap Analysis: A complete guide

To conduct a skill analysis on MuchSkills watch this video: How to conduct a skill analysis and skills gap analysis

Why you really, really need to conduct a skills gap analysis

Imagine your company provides a unique consulting service that uses your own proprietary software to help your customers. You are curious about how well your own team knows the software itself. On doing a skill mapping on MuchSkills you realise, just 10% of your workforce are experts in a software that is core to your business 🙀. You need to fix that ASAP, right?

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MuchSkills Productivity Optimisation Project

Is all of this too much work for you?

At MuchSkills, we can help you define the key skills of your entire organisation or specific key departments, teams and roles and also conduct a skills gap analysis with recommendations.

In a set of workshops we will define the organisation’s skill taxonomy and the skills required for key roles. We break them down into smaller chunks to make it clear exactly what the skills consist of. The assessment will include any custom skills as well as MuchSkills out-of-the-box skill categories such as job focus, soft skills, technical skills and certifications.

Once we help you create a skills taxonomy, using a proven methodology we will collect skill and skill level data through an employee self-assessment mapping. All data will be collected using the MuchSkills tool and will be readily available for the organisation after the project.

Using the collected data, we will analyse your current skills state to identify:

  • Software adoption issues
  • Behavioral skill gaps
  • General skill gaps
  • Department/team skill gaps
  • Key role skill gaps
  • General productivity opportunities
Learn more

Research: Data blindness about skills can be costly for organisations 

Research has highlighted the importance of developing new skills to adapt to workplace changes, tackle the challenge of identifying and managing necessary skills within organisations, and avoid the negative consequences of weak skills management. These studies highlight the need for individuals and organisations to continuously acquire new skills, address the inability to identify and utilise needed skills, and emphasise the economic impact of skills shortages on productivity and profitability.

  • 87% of workers surveyed for The State of American Jobs 2016 report by the Pew Research Centre believed that they would need to develop new skills throughout their working lives to keep up with the changes in the workplace.
  • Identifying the skills workers will need in the future due to changing technology was highlighted as one of the most significant challenges faced by business and HR leaders from over 4,000 organisations, according to the findings of PWC's Future of Work and Skills Survey, 2021. However, these leaders expressed uncertainty about the most effective way to address this challenge.
  • “It’s imperative that businesses make investments in systems that inventory and maintain an inventory of current skills and that support visualisation of gaps in future skills,” said PWC’s Future of Work and Skills Survey, 2021.
  • The biggest impediment to a smooth transformation to a digital workforce was the inability to identify needed skills, 53% of respondents told Gartner in 2020.
  • Organisations are “data blind” to the skills they need to be successful, where they need them and even to the demand and supply of skills within the organisation, according to Gartner.
  • Weak skills management – the inability to identify skills needed and efficiently use them – is costly because it hits organisational efficiency and hurts productivity and profits. When it adds up, it can hit economies hard. In the UK, for instance, skills shortages cost £4.4 billion a year in higher salaries, recruitment costs and temporary staffing bills, according to a 2019 estimate.
  • “New data-driven methods demonstrate the power of using a skills-based approach to reskill, upskill and redeploy talent,” said a 2021 World Economic Forum (WEF) report titled Building a Common Language for Skills at Work A Global Taxonomy. “Breaking job roles down into required skill sets can allow employers to better understand viable job transition pathways based on the level of similarity in the skills required for different roles and can enable employers to make more informed decisions on the kind of reskilling and upskilling required to support those transitions.”
  • The WEF report also warned that organisations weren’t adequately prepared for the future of work: “Current systems of learning and signalling job-fit do not provide the agility that lifelong learners will require, and we find ourselves at a defining moment to make skills the currency of the labour market.”

‍The creation of a skills taxonomy emerges as the most effective approach to address the challenge of identifying and managing skills within organisations, providing a structured framework to categorise, track, and leverage skills across various functional domains and workforce segments.

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